AES CORPORATION AES Asia Business Review Haresh Jaisinghani President, Asia May 9, 2006
AES Asia Market Country Population (MM) (2006 est.) Per Capita PPP GDP (USD) (2005 est.) GDP growth % p.a. (2005 est) Gener. Gross GW China 1,314 $ 6,300 508 9.3 India 1,095 $ 3,400 124 7.6 Kazakhstan 15 $ 7,800 18 9.0 Sri Lanka 20 $ 4,300 2 5.0 Source: The World Factbook; AES estimates. 1
Asia at a Glance 10,121MW Total Installed Capacity 2,000MW Ekibastuz and 1,000MW OPGC Expansion Potential 2 Distribution and 1 Heat Net Businesses in Kazakhstan Serve 0.6MM Customers High Potential for Future Growth Given Strong Economic Growth and UnderInvestment in Infrastructure Facilities 2
My Priorities Safety First Operational Excellence Business Development People Development Improve AES and contractor safety statistics Reporting near misses Recognized as industry leader in safety within region Improve fuel efficiency Reduce unplanned outages Improve root cause analysis Create critical presence in ASEAN, China and India Platform expansion at Kazakhstan & OPGC Create value through greenfield development and complex acquisitions Execute Vietnam project Alternative Energy, Clean Development Mechanism (CDM) Selected non-power, such as gas distribution, water & waste treatment Identify internal talent pool Implement mentoring and rotational programs 3
AES CORPORATION Asia Generation Business Review Haresh Jaisinghani President, Asia May 9, 2006
Asia Generation Strategic Overview AES Goals AES 2008 Target Contains Forward Looking Statements AES Asia Generation Role Financial Goals Revenue Growth Gross Margin Growth Earnings Per Share Growth ROIC Improvement (1) Cash Flow Growth Subsidiary Distributions (1) Refinancing Opportunities Growth Goals Platform Expansion Greenfield Investment Privatization/M&A (1) Non-GAAP financial measure. See Appendix. -- $3.5 Billion 13-19% per Year 11% $2.6-2.9 Billion -- -- -- -- -- Above Average Below Average Below Average Below Average Below Average Stable Limited Attractive but Conditional Significant Opportunity Focused Opportunity 5
AES History in Asia 1992-1995 1996-2000 2001-2003 2004-2006 1992 Entered India 1993 Founded AES Chigen 1994 Closed first power project in China 1995-1997 Closed the existing six other power projects in China, resulting in aggregate of 2,842MW installed capacity 1996 Chigen issued $180 MM Notes due 2006 Won greenfield gas-fired Mt. Stuart bid (288MW) in Australia 1997 Won greenfield bid in Bangladesh (two gas-fired plants totaling 810MW) with award-winning project financing from ADB and World Bank 1998 Acquired 49% stake in OPGC in the first and only privatization in India 2001 Out of management of CESCO Closed first power project in Sri Lanka: Kelanitissa 2003 Chigen issued $175 MM Bonds due 2010 to refinance previous notes due 2006 Sale of Australian and Bangladesh assets 2005 Signed MOU for development of a 1,200MW greenfield coal-fired project in Vietnam 2006 Signed MOU for development of a greenfield integrated coal mine and a 1,000MW power plant in India 1999 Acquired 51% in CESCO, a distribution company in India Acquired Ecogen (2 gas-fired plants totaling 960MW) in privatization in Australia 6
China Generation Market Characteristics Big market: 508GW installed capacity High growth: 9% p.a. GDP growth in 2005 Country rating: A- Insights Contains Forward Looking Statements Do not directly translate into robust investment opportunities for foreign investors Generation market dominated by state-owned companies Foreign IPPs own 2% of installed capacity 120GW capacity under construction Economic growth expected to slow down to 7.5% p.a. from 2007-2010 Insights Government has successfully used domestic champions, capital, and equipment Size rather than profitability drives local investments Overcapacity in short to medium term 600 China: Installed Capacity (GW) 508 500 441 391 400 322 339 353 300 200 100-2000 2001 2002 2003 2004 2005 Ownership Structure: Share of Generation Capacity Local state-owned companies 51% "Big Five" generating companies 34% Grid companies 8% Large independent hydro and nuclear generators 7% 7
China Generation Market Characteristics Contains Forward Looking Statements Industry undergoing structural and regulatory changes Insights Tightly controlled tariff setting Contract enforcement a challenge More stringent environmental regulations Government encourages development of energy efficient and clean technologies Insights Opportunities in renewable and non -power China: 2005 Generation Fuel Mix Coal 80% Hydro 16% Natural gas 2% Oil 1% Nuclear 2% 8
India Generation Market Characteristics Contains Forward Looking Statements Big market: 124GW installed capacity High growth: 7-8% p.a. GDP growth from 2006-2010 Negative reserve margin estimated at 12% Insights Significant power demand However, has not resulted in significant capacity additions Public sector champions cannot build all the needed capacities Insights Space for private local and foreign players 9
India Generation Market Characteristics Contains Forward Looking Statements Weak credit of utilities and overreaching regulations are legacy hurdles Insights Alternatives to regulated PPAs with state-owned utilities slowly emerging as a result of open access promise World s 4 th largest wind capacity (4,430MW) Returns and regulations are reasonable Active government support for CDM Insights Opportunities in renewable & CDM India: 2005 Generation Fuel Mix Coal 55% Hydro 26% Natural gas 10% Nuclear 3% Renewables 5% Diesel 1% 10
AES Portfolio in Asia Coal Oil Gas Hydro China Yangcheng, Shanxi 2,100MW 25% AES Owned China Hefei 115MW 70% AES Owned China Chengdu, Sichuan 50MW 35% AES Owned China Cili, Hunan 26MW 51% AES Owned Jiaozuo, Henan 250MW 70% AES Owned Sri Lanka Kelanitissa 168MW Diesel 90% AES Owned Wuhu 250MW 25% AES Owned Hydropower Coal Natural Gas Oil Aixi, Sichuan 51MW 71% AES Owned India OPGC 420MW Coal 49% AES Owned 11
Asia Generation Revenues Consolidated Revenue ($145 MM) Combined Revenue (1) ($720 MM) China 58% Sri Lanka 42% India 13% Sri Lanka 9% China 78% Consolidated Revenue by Customer ($145 MM) Aluminum Mill 27% State-owned utilities 73% (1) Combined revenue includes consolidated revenues and 100% of revenues of equity-owned affiliates. For the year ended December 31, 2005 12
Asia Generation Portfolio Contracted with Full or Partial Fuel Cost Pass Through Contract Generation Portfolio India Mine mouth plant with long-term linkage granted Fuel cost passed through under PPA Sri Lanka Fuel supply agreement guaranteed by government Fuel cost passed through under PPA China Fuel cost pass-through mechanism under PPA subject to government and regulatory approval in practice 13
Asia Generation KPIs Key Performance Indicator (KPI) Safety Excellence Lost time accident rate (LTAs) Days and man-hours since last LTA Near miss reporting Environmental Excellence SO X emissions NO X emissions Opacity Operational Excellence Net plant heat rate Equivalent availability factor (EAF) Equivalent forced outage rate (EFOR) Non-fuel O&M costs 14
Asia Generation Safety Performance 11 Lost Time Accidents Getting Better 3 2003 2004 2005 1 Safety Highlights All but one plant have more than a year without an LTA Cili: 4,271 days without an LTA Chengdu: 3,299 days without an LTA Jiaozuo: 545 days without an LTA OPGC: over 6.5 MM manhours without an LTA 15
Asia Generation Heat Rate Performance OPGC & Jiaozuo Heat Rate (Btu/kWh) Kelanitissa Heat Rate (Btu/kWh) 12,000 Getting Better 7,900 7,862 Getting Better 11,500 11,499 11,776 10,836 7,800 7,821 11,000 10,500 11,110 10,899 10,756 2003 2004 2005 7,700 7,725 2003 2004 2005 Jiaozuo OPGC 16
Asia Generation KPI Focus OPGC Jiaozuo Equivalent Availability Factor $45 90% 100% $30 80% 95% $15 70% 90% $0 1999 2001 2003 2005 60% 85% 2002 2003 2004 2005 1Q06 Receivables ($MM) Capacity Factor (%) 17
Asia Generation Portfolio Financing China India Sri Lanka $30 MM Renminbi & US Dollar non-recourse loans outstanding at project level Final maturity by 2009 $175 MM US Dollar bonds due 2010 at Chigen holding $17 MM Rupee nonrecourse project loans outstanding Final maturity by 2012 $65 MM Dollar based non-recourse project loans outstanding from multilateral & commercial banks Final Maturity by 2013 Data as of December 31, 2005 18
Chigen Bond Financing Outstanding Interest rate Maturity profile Credit rating US$175 MM 8.25% p.a. Due June 2010, bullet payment S&P: B+/Stable; Moody s: B1 Chigen Bond Price Movement $108 $102 $96 $90 10/03 5/04 12/04 7/05 2/06 19
Asia Generation Financial Overview (US$ Million) 2003 2004 2005 Revenue $118 $120 $145 Gross Margin $29 $25 $33 Income Before Tax & Minority Interest $50 $31 $59 Distributions to AES Corporation $123 $32 $37 Note: Information is presented on an AES basis and is unaudited. Certain intercompany transactions may not be eliminated. 20
Growth Strategies Contains Forward Looking Statements China Acquisition of restructuring provincial and local power companies Integrated coal mine and power plant Non-power, such as gas distribution, water & waste treatment Renewable, clean coal technology and CDM Seek joint venture partnerships India OPGC platform expansion Greenfield integrated coal mine and power plant Renewable and CDM Distribution privatization ASEAN Greenfield negotiated or limited competitive opportunities Limited privatization opportunities Partner with local minority players and multilaterals CDM 21
Reserve Margin for China, India and ASEAN Countries China 20% to 35% 508 375 to 425 India (12%) 140 124 Peak Demand (GW) Installed Capacity (GW) % Reserve Margin Vietnam 17% 11 9 24 15 21 12 2.3 1.8 Thailand Sri Lanka 34% 15% 25 24 Philippines 20% Source: EIA and AES estimates Bars not drawn to scale: China, India and Sri Lanka Indonesia 4% 22
ASEAN Generation Market Characteristics Contains Forward Looking Statements Philippines Indonesia Thailand Vietnam Sovereign rating BB- BB- B+ BBB GDP growth 05 4.5% 5.5% 4.5% 8.4% Electricity demand growth 9% 6-7% 6% 15% Opportunities Immediate acquisitions / privatization (medium term for new capacities) Urgent need for new capacities Urgent need for new capacities Urgent need for new capacities Competition Limited Western players; Japanese, Pan Asian and in-country players New PPAs Not possible given current law Available and modeled on earlier successful project financed deals Procurement process Negotiated / limited competition Negotiated / limited competition Structured and well managed RFP Negotiated / limited competition Political climate Data from EIA Active democracy with uncertainties overhang Newly founded democracy with fading reminiscence of political / business nexus Generally stable. However, recently Prime Minister ousted on conflict-of-interests Communist government provides stable environment 23
Greenfield: Mong Duong, Vietnam Contains Forward Looking Statements 1,200MW BOT greenfield coal-fired negotiated opportunity MOU signed in December 2005 90% joint venture with Vinacomin, the state-owned coal monopoly Non-recourse project finance from multilateral banks based on wellestablished precedence US Dollar long-term PPA and FSA backed by government guarantee Estimated project cost $1.2 to $1.4 billion Target operation by 2010 Mong Duong Project, Vietnam 24
Platform Expansion : OPGC, India Contains Forward Looking Statements 500 to 1,000MW coal-fired OPGC expansion Shared facilities built No new AES equity investment Financed by trapped cash and local (Rupee) non-recourse loans Mine mouth resulting in competitive electricity price Key issue under discussion with government power sale arrangement Timing uncertain Proposed OPGC Expansion 25